"How did these people defeat us?" asked one of the first American businessmen to arrive here after the United States' economic blockade was lifted just three months ago, after more than 30 years.

Because we were stupid, is part of the answer. In the early morning hours around Hoan Kiem Lake, hundreds upon hundreds of Hanoi's people are walking, exercising or just gossiping - as they did for centuries before we came and will be for centuries more after the "American War" is forgotten. They won the war because they are here and we are not - and that was inevitable before the first American soldiers came, then went home in 1973.

Here, in the crumbling old French colonial city that is the capital of one of the poorest countries in the world, it is difficult to believe that we considered these people a threat to our national security. Against all odds and human history, we thought we could dislodge tens of millions of Vietnamese from the only land they ever knew. Finally, stung by defeat, we organized most of the world to see if we could starve them to death economically.

And we almost did. The combination of failed collective farming and the institutional meanness of the United States led the Socialist Republic of Vietnam close to famine in the mid-1980s. But, in an amazing ideological turnaround, the communist government redivided the collective farms among peasant families and, soon enough, there was enough rice being grown to begin exporting again.

"You see the change in people's faces. They look healthy again - better nutrition," said Do Duc Dinh, director of studies at the Institute of World Economics here.

But there are problems moving to a market economy. There are things to buy now - but that means families want more money and they take their children out of school to work the fields. The gap between rich and poor is already evident and growing.

Capitalism can be as hard a master as the planned economy once imposed by the Communists, the winners of the war who still control all government. Vietnam wants corporate investment now, but investors want to invest in highways and telecommunications rather than in education and public health.

The government has to pick and choose - and for now it wants to please world business. Local problems are allowed to fester.

In Ho Chi Minh City, which we remember as Saigon, the government released figures designed to show the new prosperity. The city, with more than 4 million residents, now has more than 3 million vehicles - 2.5 million of them bicycles, 884,000 motorbikes and 1,170 automobiles. And, said the government, every day there are registration applications for 13 more cars.

The conventional wisdom is that Vietnam, where the average city wage is between $30 and $50 a month, is on the verge of the kind of boom that energized Korea and Thailand. Perhaps, but Vietnam, with an exploding population that has passed 70 million, is still decades behind in Asian economic games.

Lifting the embargo - "The big mountain in our road to the future," said Do Duc Dinh - has made President Clinton a local hero. He will be revered when the United States finally normalizes relations with the Socialist Republic.

Even with a new president, one who opposed the Vietnam War, the United States has trouble coming to grips with what we did here from 1961 to 1975. We are still pretending this country does not exist, refusing to initiate normal diplomatic recognition, ever ready to compound the stupidity that brought 58,000 young Americans here to die.